Tuesday, February 28, 2012

So Occupy London is no more -- evicted after a court fight with the City of London Corporation, the private entity that controls things in the square mile that comprises the central business district of London. Giles Fraser, the former canon chancellor of St. Paul's Cathedral, who resigned last October in protest against the church's plan to work with the City of London Corporation to forcibly remove the Occupy tent city, has penned an eloquent elegy in The Guardian.

To visit Occupy London was to take a huge cultural turn from Zuccotti Park in NYC. No drum circle. No constant harping for funds. No ugly racists using the cacophony as a forum. Instead, when I stopped by in December, theologian Timothy Gorringe, of the University of Exeter, was making a presentation on the religious roots of protest and the occupy strategy in the space that organizers had christened "Tent City University." (This truly public school boasted a great motto: "Anyone can teach, everyone can learn.") After Gorringe finished, the general assembly had a rather angry (though in respectful British style) discussion of whether the group should even hire a solicitor to respond to the court case brought against it -- because to reply to the eviction case was to acknowledge the legal standing of the City of London Corporation.

The occupy encampments around the world were undoubtedly all different. But my experience at the New York site taught me a valuable lesson in organizing. Before I became a writer, I spent a decade working as a community organizer. In the tradition outlined by Saul Alinsky, the groups I organized used confrontation tactics to level the playing field and power relationships. What that meant in practice, however, was that people could come to our meetings passively, as followers. That's because our leadership core had worked out the tactics in advance.

The first time I went to OWS, I didn't get it. The second time, under the tutelage of my girlfriend, I arrived with an old manual typewriter and started banging out manifestos (that's me in the photo above). And with that simple action, I came to understand a new style of organizing. That first time I dropped in on Zuccotti Park, I was passive. I spent the evening listening to Naomi Klein amplified by the people's mike and waiting for someone else to do something. It was an alienating experience. You couldn't join OWS as a follower. You had to bring an action with you -- even something as simple as typing on a typewriter. The Occupy movement demanded active participation.

That was its power.

In the manifestos I pounded out on my 75-year-old Remington Model 5, I dubbed this principle 'un-organizing.' The Occupy Wall Street encampments were not disorganized (indeed, they seemed hyper-organized.) But they were un-organized in the sense that they were open to adopting every person's style of activism and every individual's unique form of action. Un-organizing created a space of true empowerment, an egalitarian and utopian platform. For the time that each individual was there, each was a leader, a spokesperson, a theorist, an organizer, an equal danger to society, an equal contributor to the job of building a better world.

By denying the movement a location, the powers that be have struck at its heart. It's true, as Giles Fraser notes in his Guardian article, that you can't evict an idea. But Occupy was more than an idea. For a short while, there was a place -- an actual, physical space -- for activism in more than 100 cities around the world. Now one more city has ripped that space away. A private entity went to court. The judges ruled. The police rushed in. And they combined to make the world a poorer, meaner place.

System D could be the next center of growth for Uganda, according to this article from The Monitor newspaper.

"With about 800,000 micro, small and medium sized enterprises in Uganda the informal economy growing at about 25 per cent annually employs about 2.5 million people," the article reports -- which means that, as the summary suggests, "Artisans could be the future of this economy if they are given priority in the next financial year."

To that end, Mulangira Juma Kayima, chairman of the Katwe Metal Fabricators Cluster, has asked government to include artisans in next year’s budget -- so that the country can produce more local investors compared to the foreign ones who repatriate the profits back to their countries. As he told the paper, "The government should commend us to be our own investors because we are passionate about improving this country."

Why do nations keep going after street hawkers, when the real criminals are inside government?

As the BBC reports, James Ibori, the former governor of Nigeria's Delta State, bought a London mansion for $2.2 million in cash while his official salary was $25,000 a year. He has now pleaded guilty in UK court to ten counts stemming from accusations of money laundering and grabbing $250 million in state funds to pad his personal lifestyle. The photos show a few of the wads of cash he had stashed in his house.
Ibori's wife, sister, mistress, and even his London solicitor have previously been convicted of money-laundering.

And to think, as the BBC also notes, Ibori once had a clear shot at becoming Nigeria's president!

Thursday, February 23, 2012

Finally, someone's talking some sense about the reality of economic development in Africa.

Here's the money quote from Raju Jan Singh, the World Bank Lead Economist for Central Africa and lead author of a World Bank study of Cameroon, where 90 percent of working people are in the informal economy: "Rather than being viewed as a nuisance operating outside the regulatory framework, the informal sector should be seen as an asset for job creation and a way of giving millions of citizens the opportunity to aspire to economic mobility."

The report -- full text here: http://siteresources.worldbank.org/INTCAMEROON/Resources/CMR_Economic_update.January.2012.pdf -- argues that "recognizing that informal is normal would be the first step in developing effective policies and programs to help households create sustainable enterprises."

Tuesday, February 21, 2012

A new Tennessee law made law has made the techniques used by many moonshiners legal. As The New York Times reports, for decades, Marvin "Popcorn" Sutton made some of the finest home-made whiskey in the U.S. And for his pains he was prosecuted by the FEDs as a bootlegger. Though he took his own life rather than serve an 18-month stint in the slammer, his recipe lives on, because he sold it to a friend. And, with the coming of a new law last October, Popcorn's whiskey is now being produced legally in Nashville.

Aside from being a tragedy, the story of Popcorn's whiskey illustrates the porous film that separates the informal economy and the legal world. The definition is changed by loosening social morays and the government's need for new sources of tax revenues.

Friday, February 17, 2012

India may be a country on the move, but not for street vendors, as this editorial in The Hindu shows:

The recent national consultation on urban street vending has made it clear, despite four decades of struggle, that hawkers and mobile vendors still find Indian cities reluctant to include them. While cities are willing to accommodate on-street car parking, they view handcarts used for vending and providing services on roads as a hindrance.

The paper complains that "cities such as Mumbai and Ahmedabad pursuing irrational cut-off lines which bar a large number of vendors from getting a licence" and, in what might be a first for a major publication, urges the central government to work with the country's more than 10 million street vendors. Let's hope the politicians listen.

Thursday, February 16, 2012

Here's an astounding fact, from an article in livemint: "According to government estimates, the informal sector constitutes almost 94% of India’s workforce and accounts for around 60% of India’s gross domestic product (GDP)."

Why do governments continue to insist that these workers are illegal and their economic actions illegitimate? Should the Indian government be outlawing 94% of India's working population?

The Economist discovers the power of System D--through an examination of the unlicensed taxis that are the backbone of public transportation in Tehran. From the article:

In the absence of formal structures, a sophisticated eco-system of cab options has emerged. Commuters can call a taxi to the door or flag one down on the street to go dar baste (literally, “closed door”), hiring the whole cab for themselves. Or they can walk to the nearest main road and, at any point on the street, jump into one of the passing shared taxis that ply fixed routes up and down that particular street or between major city squares. These shared taxis form a city-wide hub-and-spoke network. Unlicensed cabs look like normal cars, but move slowly as they look for fares, flash their lights at waiting commuters and tend to have the window open just a crack so people can shout their destination at them.

Two commenters provide different takes on the quality of System D taxi systems in other cities:

1. I live in Lima, Peru where there exists a de facto total liberalized and unregulated taxis market (I say de facto because in theory, you would need to be registred to work as a taxi driver). I can tell you one thing about Lima: traffic is a mess, and that's mainly because of the huge supply of taxis that overcrowd the streets. So you have to take in conunt this externality that spreads well beyond this market and, at the end, impacts the city productivy of the country as a whole also in the analysis.

2. I regularly do business in Tanzania. The taxi system there is very like to is in Tehran - if I try and walk I am regularly 'peeped' at by hopeful taxi drivers who want to take me wherever. I will take a taxi, and, if he and I get on, often I will hire him for the time I am in country. He teaches me Swahili and waits for me between meetings. We agree a fair price. I have never had a bad experience. As everyone has mobile phones, if he doesn't know how to get to where I want to go, he phones my client and gets instructions. I love it. I learn a language, make a new friend, and get my work done at a reasonable price. Do I need anything more?

Wednesday, February 15, 2012

I never understood why, when large, profitable companies threaten to move out of New York, they immediately get offered millions in subsidies.

Consider FreshDirect, the online grocery store and food delivery service. The firm floats the idea of a $100 million subsidy offer from New Jersey and gets almost 30 percent more from Mayor Bloomberg--$127.8 million, including $20 million in cash.

The careful language of this New York Times article makes the deal suspect: "The company now plans to build a $112 million complex in the Bronx and over the next 10 years add almost 1,000 jobs to its work force of 1,963," the paper writes, but all Seth Lipsky, the head of Bloomberg's Economic Development Corporation, would confirm is that FreshDirect will invest "tens of millions of dollars" in a new facility. This divergence implies that the highly-touted $112 million investment might not ever happen--and that those 1,000 new jobs might never materialize. Furthermore, does anyone at City Hall think FreshDirect ever thought seriously about the logistics of doing just-in-time deliveries to its overwhelmingly NYC-based customers by running trucks over the always-crowded George Washington Bridge and through the routinely tied-up Lincoln and Holland Tunnels?

This deal reminds me of the 80s, when NBC extorted more than a hundred million from the city for its supposed decision to stay in 30 Rock instead of jumping across the Hudson. Think about the possibilities: Brian Williams broadcasting nightly from NBC's world news headquarters in Secaucus and Tina Fey starring in a sitcom called 1782 Paterson Plank Road.

Monday, February 13, 2012

Informal merchants often pay more to the government than legal merchants do.

I learned this when I met Maina Mwangi, a shoe vendor at Muthurwa Market in Nairobi, and one of the leaders of KENASVIT, the Kenya National Alliance of Street Vendors and Informal Traders.

He offers a particularly acute and specific take on the common complaint that street market vendors don't pay their fair share in government fees and taxes. Maina reports that a typical merchant who rents a storefront in downtown Nairobi pays 7200 Kenyan shillings ($87) per year for a license to do business in the Central Business District. By contrast, for his right to sell from his kiosk, Maina pays Ksh 50 a day to the City Council. That's about 60 cents, which sounds pretty good until you do the math: it's Ksh 1,500 a month or Ksh 18,000 ($217) a year.

The real deal: Maina pays two and a half times more than legal merchants pay for the right to operate downtown. So much for the supposedly unfair advantage street market merchants have over their legal brethren.

Tuesday, February 7, 2012

The Giants won the game, but the informal economy won the betting pool. As this Bloomberg article notes, an estimated $10 billion was wagered on Sunday night's Super Bowl -- and less than one percent of that amount involved bets placed legally. The informal economy really is an American institution.

Thursday, February 2, 2012

But here's the catch: the study only looks at what it calls "illegal capital flight or illicit financial flows" out of Mexico. It covers "all unrecorded private capital outflows that drive the accumulation of foreign assets by residents in contravention of applicable laws and the country’s regulatory framework." As the article notes, "the report finds that the vast majority (80 percent) of the money leaving Mexico does so through a method called “trade mispricing.” This is when a company either undervalues exports or overvalues imports, and agrees with its trading partner (for many this is the same entity or owner) to transfer the balance to a bank account abroad. Just as when a restaurant doing cash business fakes the number of customers it receives to avoid paying taxes, companies doctor their trade records to allow money to flow out of a country untaxed."

So this study only tracks the extent to which elite Mexicans evade the law and sneak their income out of the country.

But the street level economy is far larger than this. Mexico's GDP last year was more than $1 trillion, and the best estimate (from professor Friedrich Schneider) is that the country's shadow economy is equal to approximately 1/3 of that. So Mexico's System D is worth approximately $345 billion. That's some street trade!

[praise be John Conroy -- @informaleconomy -- for linking me to the article]

Call it recycled money, courtesy of System D. John Jones roams the subways collecting discarded Metrocards. The truth about these cards? Not all of them are maxed out. Indeed, many of them have some small amount left on them. Jones estimates that he's salvaged $20,000 in unused fares over the past couple of years. He sells restored $5 fare cards for $4. And that's nothing: unused lost and expired cards amount to as much as $52 million in a year--meaning that lots of competitors could join Jones's business--if they had the desire and fortitude. (The Metropolitan Transportation Authority contributes to that massive amount because many turnstiles only declare "insufficient fare" when you don't have enough money on your card--without telling you that there's actually still some money on your card.

But, instead of saluting a savvy businessman who's come up with a cool discount, the MTA is unhappy with Jones. Indeed, transit cops have arrested him for "unlawful solicitation and illegal access to transit services," the New York Post reports. His crime: not that he's recovering the unused fares, but that he's combining them on new metrocards and reselling them.

The publicity has garnered Jones some unlikely supporters. The Atlantic Magazine's cities blog compared him to Steve Jobs. Benjamin Kabak, of the blog 2nd ave. sagas, who held back from endorsing Jones's resale discount, declared, "I know plenty of people who are aggressive in their pursuits of discarded fare cards." And then there's the brilliant charity called metrochange--which suggests that we all should emulate Jones, and that there should be kiosks in every subway station where people can donate the amounts that remain on their otherwise dead metrocards. And leave it to The Wall Street Journal to offer something that could help Jones better target his scavenging business: a map that shows where the most people buy 'pay per fare' cards--which will often have leftover balances on them--versus where people buy weekly or monthly cards--which are generally not discarded until they are fully used up.

[I owe several free swipes to Zach, who pointed me in the direction of this story]

About Me

I spent most of the past four years hanging out with street hawkers, smugglers, and sub-rosa import/export firms to write Stealth of Nations, a book that chronicles the global growth of System D--the parallel economic arena that today accounts for half the jobs on the planet.
Prior to that, I lived in squatter communities across four continents to write Shadow Cities, a book that attempts to humanize these vibrant, energetic, and horribly misunderstood communities.
My articles on cities, politics, and economic issues have appeared in many publications, including Harper's, Scientific American, Forbes, Fortune, The Nation, The New York Times, The Washington Post, Metropolis, and City Limits. Before becoming a reporter, I worked as a community organizer and studied philosophy. I live in New York City and do most of my writing on manual typewriters.